A Prominent Swiss Call for Glass-Steagall
September 18, 2012 • 12:39PM

In the debate about banking regulation in the Swiss Staenderat, the upper house of parliament, in which the different cantons of the country are represented, Thomas Minder of the Swiss People's Party (SVP) said on Sept. 13, that cases like the greedy multi-billion job at UBS London sound the alarm bells with him for 24 hours a day, and that the regulatory legislation debated so far remains far behind the actual requirements.

"What it would take," Minder then said, "would be the introduction of a separated banking system modelled on the Glass-Steagall Act. This American legislation in 1932 [sic, 1933] after the Great Depression forced an institutional separation between the deposits business and the asset business or, as put in the branch jargon, between investment banking and commercial banking. After more than 65 years of being in effect, the Glass-Steagall Act—created by two U.S. Senators [sic] by the way —was abandoned in 1999. We know the consequences: that is the financial crisis.

"I for my part would take a step further than the separated banking system. My model envisages three units, not just two: investment banking, commercial banking and private banking. Naturally, the three units have to be independent and conducted separately, without a holding or parent firm being liable for their doings. This approach would have the advantage, that the risk were spread on three shoulders. In case of insolvency of one unit, the consequences for the Swiss economy would be calculable and bearable."

"We will soon debate once again the separated banking system," Minder said, pointing to a motion which is underway in the Staenderat and goes beyond the "too big to fail" approach which is dominating legislative initiatives in general, so far. Should this particular motion be voted down in the Staenderat, Minder and the SVP will go for a national referendum to force the issue back into the Parliament.

Minder is the owner of a small firm, Trybol, in Neuhausen on the Rhine, and he is a known institution in Switzerland's politics for his repeated campaigns against speculators, excessive bonuses and bailouts for greedy bankers, and the like.